Can RuPay in India emulate the success of China UnionPay?

The RuPay is an initiative by the National Payments Corporation of India (NPCI). It is intended to provide a domestic alternative to the global MasterCard and Visa card payment systems. It will also allow NPCI to consolidate various payment systems in India. It is directly comparable to its Chinese counterpart, China UnionPay, which has been highly successful and is a world leader in payment systems.

The central bank, Reserve Bank of India (RBI), provided the initial impetus for a homegrown payment platform as the international firms were considered expensive for Indian market in which most of the credit card and almost all debit card transactions are domestic.

Having begun in March 2012, the number of RuPay cards issued has reached more than 320 million in January 2017. RuPay cards have also been utilized for the financial inclusion schemes such as the Prime Minister’s Jan Dhan Yojana (PMJDY) of the Government of India. The PMJDY cards comprise around 70% of all the RuPay cards issued. Demonetization in November 2016 has been an important recent catalyst in the growth of RuPay cards, both in terms of the cards issued and the number of transactions that take place. The number of cards rose by more than 15% in a little over a month after Demonetization, while the number of transactions rose seven-fold from around 300,000 a day to more than 2.1 million a day on average. NPCI hopes to increase the number of average daily transactions to 5 million a day by end-2017.

RuPay cards are accepted at all ATMs across India. According to the NPCI, there are more than 145,000 ATMs and more than 875,000 point of sale (PoS) terminals in India under the RuPay platform. In addition to the ATMs and PoS terminals, RuPay cards are accepted online on more than 10,000 e-commerce websites. Internationally, they are accepted on the Discover’s global network under the NPCI's agreement with Discover Financial Services (DFS).

RuPay has followed in the footsteps of its Chinese counterpart, China UnionPay. The latter began as a payment network in China in 2002. Since then, China UnionPay has become the second largest payment network globally by value of transactions processed. Recently, a UnionPay credit card was introduced in the US market. There has been interest shown recently by both China UnionPay and RuPay to allow interoperability between the cards issued on the two payment systems. This would be a natural next step in the evolution of these successful initiatives in two of the world’s most populous countries which are the first and third largest economies by GDP based on purchasing power parity (PPP).

However, the success of RuPay has not been without hiccups. Mastercard and Visa have raised concerns that a payment system that is backed by the regulator might have an unfair advantage over its competitors. Another concern for the two global firms has been the fact that their cost per transaction is estimated to be much higher than the RuPay platform. They do, however, have the benefit of an international network and global economies of scale. This makes for an exciting 2017 as we look forward to the competition between these leading payment systems in the Indian market.